Mortgage Credit Certificate Program Presented By:

Transcription

1 Mortgage Credit Certificate Program Presented By: Partners in Building Your Dream

2 Define Affordable Housing Overview What is Mortgage Credit Certificate Enabling Legislation How The MCC Program Works Who is Eligible? Tax Deductions Recapture Tax USDA Section 502 Guaranteed Housing Program Income Limits 115% AMI Family of 4 Prequalification With Out MCC Family of 4 Prequalification With MCC MCC Amortization schedule Buying Power with MCC Economic Impact Status of MCC Program

3 Define Affordable Housing The generally accepted definition of affordability is for a household to pay no more than 30 percent of its annual income on housing. Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. Example $50,000 x30%=$15,000/12=$1,250

4 What Is Mortgage Credit Certificate? The MCC is an income tax credit. With the MCC, the qualified homebuyer is eligible to reduce their amount of income tax liability equal to a portion of the annual interest paid on their mortgage in the form of a special tax credit

5 Enabling Legislation Enactment was made possible through the 1984 Tax Reform Act passed by the United States Congress Implemented by the HOMES task force appointed by the 25 th Guam Legislature Guam Public Law ; Known as The Mortgage Credit Certificate Program Act of 2000 Administered by Guam Housing Corporation Volume Cap Annually allocated by GEDA

6 How the MCC Program Works The amount of the credit is equal to 15% to 20% of the annual interest paid. 80% Area Median Income; 20% MCC %% Area Median Income; 15% MCC The Credit is directly applied to the homebuyer s W-4 thereby increasing the monthly take home pay IRS Form 8396 is attached with your Tax returns The lender takes into consideration the new revised income from the homebuyer due to the MCC credit

7 Who is Eligible? Must be a First-Time Homeowner as defined by law Homebuyers whose income falls within the adjusted median income limits between 80%- 115% Area Median Income The home must become the buyer s principal residence

8 Tax Deductions Mortgage Credit Certificate recipients can still claim the remaining amount of annual mortgage interest paid as a tax deduction

9 Recapture Tax A home built or purchased with an MCC must be owned and occupied by the MCC recipient MCC recipients may be subject to a recapture tax if they sell the home built or purchased within 9 years of the construction or purchase

10 USDA Section 502 Guaranteed Housing Income Limits

11 Prequalification Without MCC l Annual Income Pymt; equiv.rate of int. 0 0 Adjusted Income * 22% / 12 N/A 1025 (round up to $) (38 yrs) (minus Tax & Ins) ctions 960 Real Estate Tax; Month Adjusted income * 24% / 12 N/A 1145 (38 yrs) (minus Tax & Ins) sted Annual Income 72,040 Property Insurance Adjusted income * 26% / 12 N/A 1265 (38 yrs) (minus Tax & Ins) l Repayment Income 73,000 equiv. rate of int. 296 N/A Cost 270,000 (round up to $) (38 yrs) Max Floor Rate N/A sidies 0 der Amount 270,000 n Amount RD 0 Monthly Debts 800 sted Annual Income equals % OVER INCOME LIMIT Monthly Note rate Installment 0 N/A edian income. Lender rate 5 (38 yrs) RHS Monthly Payment 0 N/A valent rate of interest N/A % Note Rate (38 yrs) 9.5 % Monthly payment subsidy 0 N/A Equiv Rate of FALSE N/A Factor 33 yrs 2.97 (38 yrs) Interest 33 yrs 38 yrs Factor 38 yrs 2.64 Repayment Calculation Monthly RD payment 0 PITI 28.7 % Total Debt Ratio Taxes & insurance 296 TD 41.8 % Too High Exceeds Qualifying Conv Lender pymt/ mo 1449 Ration of 41% MCC 0 Total Payment year Repayment Calculation RD (38 year) payment 0 PITI 38 N/A % Taxes & insurance 0 TD 38 N/A % Total 38 yr Payment 0 38 year terms? N/A

12 Loan Amortization Schedule Loan Amortization Schedule Enter values Loan summary Loan amount $ 270, Scheduled payment $ 17, Annual interest rate 5.00 % Scheduled number of payments 30 Loan period in years 30 Actual number of payments 30 Number of payments per year 1 Total early payments $ - Start date of loan 7/1/2012 Total interest $ 256, Optional extra payments $ - Lender name:

13 Amortization Schedule with 15% MCC Payment Date Beginning Balance Scheduled Payment Extra Payment Total Payment Principal Interest Ending Balance Cumulative Interest MCC 15% Credit Mon 7/1/2013 $ 270, $ 17, $ - $ 17, $ 4, $ 13, $ 265, $ 13, $ 2, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 1/ , , , , , , , $1, $1 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ 1, $ 7/1/ , , , , , , , $ $ 7/1/ , , , , , , , $ $ 7/1/ , , , , , , , $ $ 7/1/ , , , , , , , $ $ 7/1/ , , , , , , , $ $ 7/1/ , , , , , , , $ $ 7/1/ , , , , , , , $ $ 7/1/ , , , , , , , $ $ 7/1/ , , , , , $ $ 7/1/ , , $ 38,537.49

14 Prequalification With MCC y Annual Income Pymt; equiv.rate of int. 0 0 Adjusted Income * 22% / 12 N/A 1025 (round up to $) (38 yrs) (minus Tax & Ins) ctions 960 Real Estate Tax; Month Adjusted income * 24% / 12 N/A 1145 (38 yrs) (minus Tax & Ins) sted Annual Income 72,040 Property Insurance Adjusted income * 26% / 12 N/A 1265 (38 yrs) (minus Tax & Ins) Repayment Income 73,000 equiv. rate of int. 296 N/A Cost 270,000 (round up to $) (38 yrs) Max Floor Rate N/A sidies 0 der Amount 270,000 n Amount RD 0 Monthly Debts 800 sted Annual Income equals % OVER INCOME LIMIT Monthly Note rate Installment 0 N/A edian income. Lender rate 5 (38 yrs) RHS Monthly Payment 0 N/A valent rate of interest N/A % Note Rate (38 yrs) 9.5 % Monthly payment subsidy 0 N/A Equiv Rate of FALSE N/A Factor 33 yrs 2.97 (38 yrs) Interest 33 yrs 38 yrs Factor 38 yrs 2.64 Repayment Calculation Monthly RD payment 0 PITI 26.1 % Taxes & insurance 296 TD 39.2 % Conv Lender pymt/ mo 1449 MCC -158 Total Payment year Repayment Calculation RD (38 year) payment 0 PITI 38 N/A % Taxes & insurance 0 TD 38 N/A % Total Debt Ratio Imroves from 41.8% to 39.2%

15 Buying Power Improves with MCC Income and Payment Calculations Annual Income Pymt; equiv.rate of int. 0 0 Adjusted Income * 22% / 12 N/A 1025 (round up to $) (38 yrs) (minus Tax & Ins) ctions 960 Real Estate Tax; Month Adjusted income * 24% / 12 N/A 1145 (38 yrs) (minus Tax & Ins) sted Annual Income 72,040 Property Insurance Adjusted income * 26% / 12 N/A 1265 (38 yrs) (minus Tax & Ins) Repayment Income 73,000 equiv. rate of int. 296 N/A Cost 289,000 (round up to $) (38 yrs) Max Floor Rate N/A sidies 0 der Amount 289,000 n Amount RD 0 Monthly Debts 800 improves by $19,000 sted Annual Income equals % OVER INCOME LIMIT Monthly Note rate Installment 0 N/A edian income. Lender rate 5 (38 yrs) RHS Monthly Payment 0 N/A valent rate of interest N/A % Note Rate (38 yrs) 9.5 % Monthly payment subsidy 0 N/A Equiv Rate of FALSE N/A Factor 33 yrs 2.97 (38 yrs) Interest 33 yrs 38 yrs Factor 38 yrs 2.64 Repayment Calculation Monthly RD payment 0 PITI 27.8 % Taxes & insurance 296 TD 40.9 % Conv Lender pymt/ mo 1551 MCC -158 Total Payment year Repayment Calculation With the Improve Debt Ratio The Buying Power

16 Economic Impact of An Existing Home Purchase Home Price $270, Year MCC Tax Credit $38, Year Economic Impact Principal $270,000 Interest $265,000 Taxes $18,000 Insurance $106,677 Maintenance $72,000 Total $731,677

17 Economic Impact 30 Year MCC Department Of Revenue and Taxation Impact $38, Year Windfall of Funds contributed to be recycled $731, Note: This does not include food, power, and water and depending on source of funds ie; Freddie Mac, Fannie Mae or portfolio funds, impact may vary

18 Economic Benefits New Dollars to economy (Freddie or Fannie) New Capital Infused Banks make servicing fees and or spread Capital recycles back to relend to community Trickle down effect Realtors, escrow, appraisers, inspectors Material supply companies Developers and contractors Cable, Telephone and Yard maintenance Grocery

19 Economic Benefits Job Sustainability Revenues earned by Insurance and Banks Supply chain Real Estates related industries New Aggregate Value for Government of Guam Government Guam uses these new aggregare values to increase its Debt Ceiling Capacity With New Debt Ceiling Capacity Government can restructure its finances or borrow for other social and capital needs Government of Guam Revenues Guam Power Authority Guam Water Works Real Property Tax

20 Status of Program GHC Rules and Regulations in Draft Form GHC and DRT Rules Overview Legal Counsel Review and Amendments GHC Board of Directors Review and Approval Public Hearing Approval by the Guam Legislature Approval of the Governor of Guam

21 For More Information Please Contact: Martin Benavente President Guam Housing Corporation ITC Building, 5 th Floor Suite 535 Tamuning, GU Phone: (671) Fax: (671)